PayPal transformed how 3,500 people work to try to win mobile payments

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In some ways, PayPal is more famous for pioneering online payments in the late ’90s than its recent past. PayPal’s acquisition by eBay in 2002 helped launch the careers of the PayPal Mafia—Elon Musk and Peter Thiel—and it was nearly synonymous with online payments for years.

Now the company is also under existential threat from giants like Google, and Apple, which might jump into a space already crowded with upstart competition from Square and Dwolla. To own the space, PayPal can no longer rely on its head start. The company provides close to half of eBay’s revenue, but its service hadn’t changed much in years.

To help combat some of the company’s inertia, PayPal is nearing the end of one of the biggest and quickest management transformations in the industry, according to CTO James Barrese.

When Barrese took over as CTO in 2012, he focused on shifting PayPal’s 3,500-strong tech team from an increasingly outdated waterfall structure to agile development. The process first began two years ago in parts, and is now being completed on a large scale.

Briefly, waterfall development starts with a set of requirements mandated from the top, then a sequential series of steps (design, construction, integration, and so on) leading to the product’s eventual release. The process emphasizes hierarchy and top-down management.

Agile development tends to emphasize independent, smaller cross-functional teams, working on products continuously, responding to change, and releasing software very frequently.

“This is probably the biggest agile transformation in the industry that’s happened, and we’re doing it very quickly,” Barrese told Quartz.

“We had a lot of process and overhead in the way we were working in the waterfall model,” Barrese says. “We blew all of that out and now we’ve to smaller teams that are self-driven, they own their products. Every two weeks we have working code, where in the past you’d have to wait 9 to 12 months until something would be released.”

Instead of having managers who are administrators, Barrese says, they’re all expected to understand the technology they’re trying to change. It’s not just a shift in process, but also in expectations.

The company also switched to using open source software, and to a cloud-based infrastructure, both of which required big shifts from the company’s engineers as they rewrite large parts of the company’s code.

PayPal has made promising acquisitions, and was recently determined to be so valuable that activist investor Carl Icahn suggested it would be more profitable split off from parent company eBay. While that’s unlikely to happen, the shift in management comes at a time when the business is also rapidly changing. In 2010, mobile payments were 0.8% of PayPal’s business. Last year, they were 15%, a number which is only going to keep rising dramatically. Being able to react and change quickly is going to be more important than ever.